A Potential Downfall of Using Dividends as the Plug Item

question 89

Multiple Choice

A potential downfall of using dividends as the plug item is that:

• A) it may send shareholders mixed signals.
• B) dividends are constant within a planning horizon.
• C) the firm may have to borrow cash to pay dividends.
• D)shareholders may receive an excessive return.

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Definitions:

Services

Intangible products that are produced and consumed simultaneously, offering value without resulting in the ownership of physical goods.

Communist Systems

Political and economic systems in which property and resources are commonly owned, aiming to eliminate social classes and promote equality.